Can Minnesota take the house from my mom after she enters a care facility before she gifts it back to me?


Hello, I'm looking for information that can help us determine how to move forward. My Grandpa is looking to gift the house to my Mom who lives in Minnesota, followed by her immediately gifting it back to me. She'll be going on Medicare in March and will still be on MNsure (health insurance marketplace). She's also looking at going into a facility for long term care there. We're concerned that if we do this the state or government would immediately take the house before it's gifted to me. I've consulted with two different elder law attorneys here in California who say this plan is very common and is easily executed, but the fact that she lives in a different state concerns them. They're unfamiliar with the laws there and how they might differ. For some extra context the reason the house has to be gifted to my mom first before coming to me is to maintain the low property taxes here in California by not skipping a generation (Prop 13).

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Currently living here is me and my wife, my grandpa, and my uncle (it’s a large house). The current trust says that once grandpa passes the house will be sold and the proceeds will be equally split amongst his 4 children. We want to do a new trust so that the house stays in the family. It would eventually be gifted to me and i would take out a loan against it to buy out two of the children (my mom and uncle want to waive their portion and leave it in the house, as a gift of sorts). Regarding the gift tax I’ve been told it’s a $5 million limit over a lifetime and considering his age he’s not concerned with it. Not sure how it would affect my mom’s gift taxes since she would also be gifting it to me, but I don’t think she’s concerned about passing that limit ever either. I’ve been told that they can’t take a house if someone in a facility states an intention to return home regardless of how unrealistic it is. The past attorneys were ready to go but neither were comfortable and for whatever reason the most recent one sent me to find the answer regarding Minnesota law. I don’t intend on returning to her, but I do still need an answer for the next one I consult with.
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This is complex. You need a lawyer, and one who practices in Minnesota.

As far as Medicaid goes, if Grandma receives a substantial gift, such as a house, she is required to use it for her own expenses. She could sell it to you at market value and use the proceeds on herself, but giving it away would invoke a penalty if she applies within 5 years of the gift.

Why can't GP leave the house in his will? Who lives in the house now?
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EpsilonOrpheon, this is a very complex issue. I am not sure regarding Medicaid [which is different from Medicare] regarding if Mom needs to use Medicaid later down the road for her care, how an out-of-state house would be considered. Each State runs their own Medicaid.

One thing that some people forget with a relative gifting a house to another relative is the Capital Gains Tax when the time comes to sell the house later on.... the Capital Gain tax will be based on how much your Grandpa paid for the house. Also with gifting, the IRS will be looking to see if a Gift Tax will be involved to which Grandpa would need to pay. Usually one parent is allowed to gift a child $14k each year limit.

It is much better if Grandpa had the house in his Will, then the value basis would be the day your Grandpa passes. And no Gift Tax involved.

And if Mom gifts the house to you, chances are the Capital Gains Tax would still be based on the cost of when Grandpa had bought the house, since your Mom didn't purchase the house.

Ekkkk, see how complicated this is, plus the low property taxes if a property goes from one generation to the next.... and with the new Tax Reform generated by Congress recently, things might have changed. I am really surprised the two Elder Law Attorneys weren't able to answer all of your questions.   You might want to check with a CPA regarding the Capital Gains taxes and the Gift taxes.
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